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Steps For Quickly Writing A Promissory Note

A promissory note is a casual document usually created to set the terms and details of a loan and is most commonly used when borrowing or lending money. At the same time, however, a promissory note should never be taken lightly. It is legally binding, which means the note should be crafted in an acceptable format. To make sure you have the right format for a written agreement to pay someone (this is what a promissory note actually is), you can easily find a standard promissory note template in PDF, and simply fill it in with your own hands.

Not sure how to get started? Check out the best samples of free printable promissory notes in PDF.

Keep in mind, when you are ready to sign a promissory note to borrow or lend money, it’s important to fully understand how this document works — what format and structure are required, and what crucial elements are a MUST.

A Promissory Note: What It Is By Definition

By definition, a promissory note is a written document that effectuates a promise to return an agreed amount of money. Promissory notes are sometimes found in the private sector (peer-to-peer loans), but most commonly in the industry of financial services (formal loans, such as commercial loans, mortgages, etc.). Most commonly, you will want to take out a car loan or, for example, a student loan. This is exactly when a promissory note comes into play — you sign this document to agree to the terms and conditions of the loan and to fix a schedule for payback.

As already mentioned, promissory notes are often used informally (i.e. when lending money to a family member or friend). Of course, you won’t worry about a few dollars; however, when dealing with a significant amount of money for personal lending, an official promissory note acts as a good insurance policy to make sure everything goes as agreed.

Step 1: Choosing The Right Type Of Promissory Note 

Before getting down to writing up a promissory note, depending on the loan, it is recommended you choose the right structure. Use a secured promissory note when real estate (or personal property) is offered as collateral — meaning the lender takes the collateral in case the borrower doesn’t pay. When it comes to short-term deals with family members, business partners, or friends, promissory notes are usually unsecured. An unsecured promissory note comes without any collateral, that’s why this document must be enforced by the court if something goes wrong.

Of course, there is no need to spend too much time and effort, crafting a promissory note with your own hands from scratch — you can simply fill in the blank promissory note PDF format. Try browsing professional promissory note samples in PDF from trusted providers.

Step 2: Writing Structure For Your Promissory Note

Promissory notes must include the following information from both the lender and borrower: signatures, an agreed upon payment schedule, and a fixed (or variable) interest rate. When secured, a promissory note should also include collateral (security assets) that will be turned over to the lender in case the second party fails to pay back the loan.

Since a promissory note is a legally binding document, it should be crafted to fit the needs of both parties. Make sure to use the following structure and read the description of what must be included. We recommend downloading a promissory note form in PDF format to make sure you have everything in place, including:

  • Information on the lender and borrower
  • Loan amount, terms and schedule, interest rate, date
  • Securities (for secured promissory notes) and signatures.

Section 1: Information On The Lender And Borrower

Typically, the information on the lender and borrower is straightforward. The first section of the promissory note should simply include the current data and the borrower’s/lender’s name and address. In other words, you are to cover the basic information about both parties — the borrower and the lender.

Section 2: Loan Amount, Terms, Interest Rate

Make sure to have the amount of borrowed money written not only in numbers but spelled out in words too. By doing so, you will prevent any potential misreading or altering. In the case of loan terms, never use any ambiguous timelines; instead, use clearly specified dates explaining how often payments are to be made and be sure to include a due date for the first and last payment. Just like the loan amount, the interest rate (either fixed or variable) should be included in both forms — numerically and written out.

Section 3: Securities And Signatures

Once you have decided on the type of document, you should include the collateral for a secured promissory note, or simply skip this section entirely should you just need a private note for a peer-to-peer loan. The last thing required is what seals the promissory note deal — signatures proving that both parties agree to the terms of the document. Once it is done, your collateral note is finalized. 

Bottom Line

Remember, a promissory note is a legally binding document. For this reason, it’s always safer to play it safe — make sure you have everything in place by checking out some tried and true promissory note templates in PDF; or you may simply fill in the blank promissory note in PDF from a professional provider.